The Brainchip Holdings Ltd (ASX: BRN) share price ascended to unicorn status after running more than 200% since August and 1000% this year. However, with its underwhelming finances and arguable short-term share price top, should investors be looking at Pro Medicus Limited (ASX: PME) as a more reliable, large cap player in the software and AI for healthcare space?
What does Pro Medicus do?
Pro Medicus is a leading provider of radiology information systems (RIS), picture archiving and communication systems (PACS) and advanced visualisation solutions to help clients deliver first-rate patient care by enhancing and streamlining medical practice management. The company generates revenue from a range of offerings including software as a service (SaaS), professional services and support services. In FY20, its revenues increased 23.9% to $56.8 million, NPAT increased 20.7% to $23.1 million and cash reserves were up 34.3% to $43.4 million. The company is debt free and even looks to pay a full year dividend of 12 cents or a yield of 0.50%.
Wasn’t Pro Medicus also a unicorn?
Pro Medicus was a market darling unicorn at some stage, having gone from a mere microcap to its inclusion into the S&P/ASX 200 Index (ASX: XJO). The company boasts a $2.7 billion market capitalisation with increasing profitability to catch up to its high valuation.
How does Pro Medicus compare to the Brainchip share price?
Brainchip is now worth more than $700 million thanks to its recent price run. The company is still very much in its research and development and prototype stage with its proprietary neuromorphic processor called Akida. This processor would analyse data within itself rather than transferring to the cloud or a data centre. The solution would be high-performance, small, ultra-low power and would have a range of cutting edge capabilities. In Brainchip’s half-year financial report, it reported US$13,397 in revenue and an operating loss of US$6.19 million. More recently, the company entered into an agreement to support a Phase I NASA program for a processor that meets spaceflight requirements. The agreement cited that payments are intended to offset the company’s expenses to support partner needs.
From a revenue perspective, Pro Medicus generates a few hundred times more revenue than Brainchip despite only being worth four times more from a market capitalisation perspective. While Brainchip’s technology could have significant applications across many sectors, the company has yet to generate any meaningful revenues or sales. Furthermore, it could be at risk of a potential capital raising should money in the bank dry up.
Pro Medicus represents a large cap version of Brainchip with a proven product and growing revenues. I believe Brainchip is in a volatile position where much of its hype has been priced in. For those interested in the space, Pro Medicus could be an alternative.
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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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